New York’s Legislature wanted to give tax breaks in Lower Manhattan in exchange for limits on rent increases. The mayor and the real estate lobby had another idea.
In June 1995, a proposal to revitalize the ghostly New York neighborhood near Wall Street was poised to pass the state Senate. The bill offered developers multimillion-dollar tax breaks if they were willing to turn aging office buildings into apartments. Landlords, in turn, would agree to limit rent increases, a standard provision for such programs.
However, just hours before the Senate was scheduled to adjourn for the summer, Joseph L. Bruno, the Republican leader of the Senate, surprisingly slammed the brakes and pulled the bill off the calendar. He later said the reason was simple: He wanted time to consult New York City’s mayor, Rudolph Giuliani.
In the months that followed, ProPublica has found, a handful of Republicans maneuvered behind the scenes to radically undermine the rent-stabilization aspect of the program without actually rewriting the bill. They accomplished this goal through a novel approach: Giuliani wrote Bruno a letter in August declaring that the city’s intention was for the rent limits to apply only to tenants who paid less than $2,000 a month. Anyone else would have to pay market rates.
No one attempted to change the language of the bill, which had already been approved by the Assembly. It said apartments were to be “fully subject’’ to rent-stabilization laws
The debate was brief when the Senate finally met in October. Just before the vote, a Republican Senator asked to read Giuliani’s letter into the record. None of the Senators commented on its contents, and the bill passed 53—1.
The tax program — known as 421-g — spurred the creation of almost 10,000 rental units that helped transform lower Manhattan over the past 20 years. However, three out of every four units created under the program were never rent stabilized because the initial tenants paid more than $2,000 a month.
As rents have gone up, many more units have escaped stabilization as developers, their lawyers, and officials in state and city government have accepted Giuliani’s letter as the last word on how to interpret the 1995 law.
The state housing authority cited Giuliani when it concluded in 1997 that expensive apartments could be rented without restrictions. The city asked developers applying for benefits under the program identify their units as stabilized or exempt. When tenants raised questions, landlords showed them Giuliani’s letter.